kruse-andersen.bsky.social
Assistant professor, Department of Economics, University of Copenhagen.
Research: Economics of Climate Change , Environmental Economics, and Economic Growth.
Main interests: economics, politics, and aircrafts.
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19 following
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Our numerical simulations show that our tax-subsidy scheme could provide a welfare gain of around 0.3 percent of national income if politicians have a strong aversion to carbon leakage
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While the uniform carbon tax ensures a domestic emission reduction target, the other instruments depend on the politicians’ aversion to leakage
With no aversion to leakage, only a uniform carbon tax is needed
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(7) Tax on domestic production of fossil fuels
Intuition: reducing domestic production increases net imports, thereby increasing the international price of fossil fuels and thereby decreasing foreign consumption
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(6) Subsidy to green energy production
Intuition: increasing domestic production reduces net imports, thereby reducing the international price of green energy and thereby increasing foreign consumption, resulting in lower fossil fuel use
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(5) Tax on green energy consumption
Intuition: increasing domestic production reduces net imports, thereby reducing the international price of green energy and thereby increasing foreign consumption, resulting in lower fossil fuel use
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(4) Consumption taxes on all non-energy goods
Intuition: reduction in domestic consumption reduces net imports, thereby reducing the international price of green energy and thereby increasing foreign consumption, resulting in lower fossil fuel use
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(3) Location subsidies to all non-energy sectors
Intuition: counteract leakage at the extensive intensive margin by reducing the profit loss from regulation
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(2) Output subsidies to all non-energy sectors
Intuition: counteract leakage at the intensive margin by increasing international competitiveness
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(1) A uniform carbon tax on households and all non-energy sectors
Intuition: equalize marginal abatement costs across sectors and ensures a domestic emissions target
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Our general equilibrium model prescribes an intuitive tax-subsidy scheme with 7 elements…
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As a novel feature, we distinguish between leakage at the extensive margin, where domestic firms relocate to foreign countries, and leakage at the intensive margin, where domestic firms lose world market shares
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